IDBI Bank stake sale: FinMin in talks with RBI to hurry vetting process

Govt hopes to conclude transaction by FY25-end

The finance ministry (FinMin) has raised concern over the “inordinate” delay at the Reserve Bank of India (RBI) to complete the vetting process of the interested bidders for IDBI Bank. The long vetting process has kept the strategic stake sale on hold, a senior government official told Business Standard.
 

The ‘fit and proper assessment’ by the RBI is a key step for the qualified parties to be eligible to put in their financial bids. “We feel the RBI has taken inordinate time. We have flagged it, we have questioned and persuaded them. They keep seeking more information and queries (to complete the process). We hope they do it faster so that the due diligence can start and the financial bids can be called thereafter,” the official said.

The RBI and the FinMin did not respond to queries sent by Business Standard till the time of going to the press. The government had forwarded bidders’ details to the RBI in January 2023. “One of the reasons for taking a longer time is the involvement of multiple players – private equity firms, NBFC (non-banking financial company), a consortium and not just banks (who are in the fray). In that case, the conditionalities are also detailed,” the official said.

The proposed IDBI Bank stake sale is divided into two stages – inviting an expression of interest (EOI), followed by a ‘fit and proper assessment’ and security clearances. The second stage — the bank’s due diligence — will be by the potential bidders, which can take up to two to three months. This will be followed by inviting financial bids. The government now hopes to conclude the transaction by the end of the current financial year, the official quoted above said.

In the FY17 Union Budget, the government announced its intention to reduce its stake in IDBI Bank to below 50 per cent and put out the preliminary information memorandum for inviting expression of interest in October 2022. The strategic stake sale is seen as a test case for the government’s public sector enterprise policy to cut down the government’s presence in business.

The government and Life Insurance Corporation (LIC) plan to sell 60.72 per cent stake in IDBI Bank. LIC holds 49.24 per cent of IDBI Bank, while the government owns 45.48 per cent, according to data available as of December 31, 2023.

The Department of Investment and Public Asset Management, the nodal department responsible for disinvestment, had received multiple interests for the proposed stake sale and transfer of management control in IDBI Bank.

THE ROAD TAKEN

FY17 Budget: Government proposes to pare IDBI Bank stake to below 50%

May 2021: Cabinet Committee on Economic Affairs approves the proposal

October 2022: Government invites bids for stake sale

January 2023: Government  forwards bidders’ details to RBI

November 2023: Centre issues fresh request for proposal for appointment of asset valuer

December 2023: LIC holds 49.24% in IDBI Bank, Centre owns 45.48%